The (un)reliability of real-time output gap estimates with revised data

- We investigate the differences between real-time and ex-post output gap estimates.
- We construct a new international real-time dataset.
- Real-time output gap estimates can be well approximated by quasi real-time methods.
- The results are robust to the use of various detrending methods.
- Reliable real-time output gap estimates can be constructed with revised data.

This paper investigates the differences between real-time and ex-post output gap estimates using a newly-constructed international real-time dataset over the period from 1973:Q1 to 2012:Q3. We extend the findings in Orphanides and van Norden (2002) for the United States that the use of ex-post information in calculating potential output, not the data revisions themselves, is the major cause of the difference between real-time and ex-post output gap estimates to nine additional OECD countries. The results are robust to the use of linear, quadratic, Hodrick-Prescott, Baxter-King, and Christiano-Fitzgerald detrending methods. By using quasi real-time methods, reliable real-time output gap estimates can be constructed with revised data.